John Cofran

John Cofran
Contributor since: 2012
Company: CofranCapital
Has there been a discussion of $ARLP vs $AHGP ? Any analysis/opinion on which is a better buy currently?
Hey, I couldn't agree more. I am secular bearish. I am also an opportunist, so after a 10-20% drop, I expect to find some long-term values. But I agree, we could be in for a 50% drop, I just hope not. That said, we should expect a free fall if Barak is re-elected.
I was early in on the first leg down, buying in at Dow 10,000. I went in further at S&P 1,000. I went in deeper and deeper as we fell, fortunately maxing out at the very bottom.
That was a unique period in modern history, but not one that will not be soon repeated. I am remindd of 1929-1933... Fall, bounce, collapse, Great Depression. I expect we have a 55% chance of that repeating today, and 85% chance if Osama is re-elected.
That's right. For better or worse, I will never go 100% short US equities. For me, the equivalent will be pulling all my cash out of US accounts, moving to another country and hoping for the best. But yes, I will never go 100% short the US stock market.
I am long-term hopeful (emphasis on HOPEFUL) on the US, short-term bearish (ST = 2-3 years). That said, I believe momentum reigns and technicals play a role in buy/sell pivot points. Therefore, I do believe we could rally to test 1,570 or more (1,600 maybe), but then look out below...
@debrasev, thank you for your kind comment. I would be happy to discuss in detail my dividend strategies. Email me any time at john@cofrancapital.com.
Regarding your question, my suggestion is that by the time we approach the all-time highs (about +9% from here), investors should be at 50% or less their maximum allocation to equities. Assuming a typical max allocation to equities of 100%, I feel investors will want to be at no more than 50% as we approach 1,570. For investors with a max allocation to equities of 60%, they would trim their exposure to 30% +/-
That said, everyone's situation is unique, so this advice does not apply as a one size fits all. The strategy recommendation is based on someone who would typically be comfortable 100% invested in equities.
That said, I generally suggest one allocate no more than 75% of their net worth to equities. The remaining 25% can be in real estate, gold, hard assets, bonds, cash, etc.
Volume doesn't concern me over long periods. It could be a secular shift causing the volume declines rather than a short-term technical phenomenon.
I agree it is a dangerous time to be long, however, I do not think the recent rally is simply a short squeeze. I do believe most asset managers are behind the eight ball and have much catching up to do, which accounts for some of the buying. Internals are actually quite strong, and the VIX bottoming out contributes to the contrarian view that the market is due (eventually) for a pullback or correction.
I have no crystal ball, so the pullback could happen tomorrow, or it could happen 5% - 10% up from here.
In any case, when it happens, I suspect it will be 10% - 20% at least.
I am not positioning the entire portfolio short, however I have moved from 130% long to 100% long, and have added a few short positions (PEP) for example. I believe that investors should never move to 100% short, as I have faith in our country/economy over long periods (20 - 50 years). Thus, I go short only to hedge generally. In even the worst environments, I can only see going 50% - 70% cash. Never could I see going to negative market exposure.
It certainly is wise to hold core positions in world class companies. What is not wise is riding those positions up and down, ending up in the same place we started. Market timing is difficult for many, but individual names often fluctuate 10% - 20% each year. It never hurts to lighten up after a 20%+ rally in any blue chip name, or add to positions after a similar fall.
As we approach all-time highs, it is advisable to trim trading positions, speculative positions and rotate out of high beta names. I also do not like welcoming the tax man in every time I sell a position. So, I use a few basic strategies:
1. Sell covered calls on core positions, juicing gains and cushioning market pull-backs.
2. Sell big winners in tax deferred accounts (IRA, SEP, 401k, etc), to lighten up market exposure without triggering a tax event.
3. Sell losers in taxable accounts, lightening your overall market exposure and providing you a write-off.
4. Sell losers in taxable accounts and reacquire the position in a tax advantaged account, assuming you still like, and want to maintain a position.
5. Buy puts to protect positions.
6. Hedge your portfolio with short positions using either short market ETF's, such as SDS and SSO, or by shorting the SPY.
7. As you suggest, trip positions around the edges, cutting even core positions by 1/4 to 1/3. Be sure to sell lots with the higest basis to avoid taxable gains.
I'm in now through December $70 calls. Seems like a gift from Mr. Market.
As a quick follow-up to my 2012 S&P Predictive Analysis Article, it appears this year has played out consistent with the historic data. The $SPY (SPY) is up roughly 12.5% through August 17, 2012. We have retested and taken out the 2011 highs and are looking at the all-time highs on the horizon. Having run up as much as we have, further upside is more limited and caution is warranted. While it is possible the rally has another 10% or so to go, long-term I have been predicting we bounce hard off the all-time highs in the S&P. Use caution and lighten up some every 1-2% advance from here. As we approach the all-time highs, I suggest investors be no more than 50% invested in stocks in relation to their typical allocation.
this description of this strategy is flawed in every way... there is hope for the strategy, but not for or in the way the author describes
Nice analysis. Very helpful.
don't wait for a change in rates, or you will be too late and lose much of your recent gains
be ahead of a rate change and be wary of blindsightedness
this makes absolutely no sense
PBI is under attack. That said, picking a bottom in a fundamentally weak business is like catching a falling knife. There is a price at which PBI will make you money, but given where the yield is currently, I recommend only as a speculative position in your portfolio.
Stocks 1,
I agree the sample size is small, howevver my analysis, like the Stock Traders Almanac, is just one of many handicapping tools available to form an overall hypothesis.
Keep in mind, statistical analysis has been useful in handicapping plenty of events with small sample sizes- Superbowls, boxing matches, etc.
For me, knowing the market has been up April 1 - Dec 31 in 33 of 38 occurrences after an up first quarter, and knowing the market has historically produced outsized gains following a flat year simply aids in my decision to remain 133% invested in the short term.
Should the year play out consistent with history, I will sell in May (lighten up to 70% invested) and re-enter as we near Q4.
While this may sound like timing, note I simply aim to buy low and sell high. We have had a great run since October, so paring back based on statistical analysis simply means I will be selling high. I miss a few points, but a 20% year is not bad, and I may be able to pick up another 5 points in Q4.
Personally, I consider myself VERY conservative when it comes to investing and trading. For me, the higher the market goes, the more nervous/bearish I get. Thus, once we approach the previous all-time highs in the S&P I will be lightening up dramatically. A 10% - 20% correction would seem plausible to me at that point, setting up for much more favorable re-entry. I am encouraged by this week's Barron's cover story which talks of a favorable political environment after the election. IF republicans can control congress, my optimism would increase that Washington would become more pro business and pro investor.
Danielita,
In this case I downloaded the raw data from Yahoo Finance and sorted/manipulated to perform analysis. Using Yahoo is amateurish, but I figure the daily OHLC data is from a 3rd party and should be accurate.
As they say, those lacking a keen awareness of the past will be destined to repeat it.
I own it. The beauty of the markets is they behave just as people/herds do, so it is often possible to predict future behavior. In this case, there is plenty of support for the rally continuing through to a retest of the all-time highs.
Frankly, at that point, I am likely to move 50% - 100% into cash.
Missed 2004... April = -1.68%; April 1 thru Dec 31 = 7.61%
Timothy,
In 1956, April was -1.11% and April 1 thru Dec 31 was -5.13%
In 1964, April was +0.61% and April 1 thru Dec 31 was +7.31%
In 1972, April was +0.44% and April 1 thru Dec 31 was +10.13%
In 1976, April was -1.10% and April 1 thru Dec 31 was +4.56%
In 1980, April was +4.11% and April 1 thru Dec 31 was +32.98%
In 1984, April was +0.55% and April 1 thru Dec 31 was +5.04%
In 1992, April was +2.79% and April 1 thru Dec 31 was +7.93%
In 1996, April was +1.34% and April 1 thru Dec 31 was +14.75%
Thus, April was up 6 of 8 with an average return of +0.95% and April 1 thru Dec 31 was up 7 of 8 with an average return of +9.70%
baystoeninc,
I have analyzed that data as well. Since 1950 there have been 8 occurrences of > 10% Q1 returns. In 6 of 8, April was also positive, with an average return of 0.64% for the month. This compares with an average April return of 1.66% for all positive Q1 occurrences.
For the balance of the year, the market was up 7 of 8 occurrences, with an average return from April 1 - Dec 31 of 4.7%. This compares to an average April 1 - Dec 31 return of 9.22% for all positive Q1 occurrences.
It appears the data show that in years where Q1 returns exceed 10%, performance tends to be worse than when Q1 returns are between 0% and 10%.
You've got it now @austinbroker
If the dividend was .60 in 2007 and is 1.15 in 2011, it increased .55 in 4 years... 2007 is your base year, or year zero, not year 1.
@austinbroker, the time is 4 years, that is where your calculation error is... the time span between 2007 and 2011 is 4 years, not 5
nice analysis, thanks
Followers of Graham would disagree with most, if not all of this list. No discussion of book value, let alone working capital is provided. Graham was famous for buying companies for less than book value, and in some cases less than net working capital. Stocks in this list generally do not meet either criteria.
@herbgreenberg just used my analogy of the "coiled spring" word for word on air in reference to the research I presented in this article :-)
CNBC just quoted my research moments ago on air.
I agree there are unanswered structural issues, notably employment. I admit I do not have an effective long-term answer to that problem, but who does? In the long-term (measured in decades) I am not bullish on the U.S. In the short-term, I believe the reinflation and election argument will aid in pushing us near recent and all-time market highs. What my article does not touch upon, but is addressed in my InstaBlog posts, is what happens after we retest these highs. My opinion is we fall hard (by as much as 30%) as unaddressed structural issues resurface in 2013 and beyond.
I am suggesting it will (have to) be resolved in 2012. Regardless of where the chips fall, the uncertainty that has been hampering the markets will be out of the way.